Software special: IT investments – change tactics

Software special: IT investments - change tactics

Should you be spending or saving on IT investment? A little bit of both could dramatically drive your business forward

In today’s difficult economic climate, the key focus for most organisations
is on cash, whether that means improving its flow, boosting working capital or
saving money.

As a result, while some large enterprises are currently engaging in extensive
finance transformation projects in a bid to introduce more transparency,
consistency and control into their processes and systems, the majority are
taking a more conservative approach.

Indeed, many companies are attempting to cut costs by between 10% and 20% and
appear reluctant to spend huge sums on upgrading or re-implementing back office
finance and accounting systems or introducing large-scale organisational change.
Instead, they are looking for ways to squeeze more out of existing applications
in order to maximise their investment.

Andrew Parton, a managing consultant at
Capgemini
Consulting
, indicates that the percentage of systems that are currently
underexploited tends to be ‘pretty high’.

‘You often find that organisations spend all of their budget doing 80% of a
systems implementation when it’s the last 20% that delivers 80% of the value.
And this 20% often relates to the people issues, which is about the acceptance
of systems and processes,’ he says.

Introducing some relatively small and inexpensive tactical changes can make a
big difference, however.

Although most organisations do not put enough focus on training and
education, for instance, such activity is crucial if personnel are to get the
most out of applications by learning how to fully exploit their functionality.

They are also less likely to bypass them entirely and default to using
spreadsheets, which causes information in source systems to become out-of-date
and inaccurate.

But other considerations in this context also include revamping the front end
to make it easier for employees to use, as well as reconfiguring or tweaking
various technical elements to make the back end technology run more smoothly.

‘It’s about tidying up the loose ends from a previous ERP implementation or
finance transformation and taking responsibility for continuous improvement. In
a recession, there’s an imperative, which is not there when things are in growth
mode, for people to think about how they can do things in a better way,’ says
Parton.

One relatively cost-effective approach in this context involves undertaking a
health check in order to establish which individual business processes it makes
most sense to optimise in order to generate a swift and high return on
investment. To support them in such activity, some organisations are starting to
employ ‘lean’ or ‘Six Sigma’ techniques, which originated in the manufacturing
space, in order to analyse their working practices, identify inefficiencies and
remove waste.

Steven Culp, managing director at
Accenture’s
finance and performance management practice for Europe, explains the rationale
behind such moves. ‘Early in the gestation period, processes and systems tend to
be tightly focused, but they burgeon over time as organisations make
investments, grow organically and inorganically and markets change,’ he says.

As a result, people start introducing local workarounds, a lack of
standardisation ensues and the cost of operations increase. But when
organisations are no longer in growth mode and feeling the affects of recession,
their focus tends to switch from generating sales to managing working capital.
Standardising working practices is seen as an important possible way to reduce
or even eliminate wastage at this level.

Once the groundwork has been done, some organisations choose to introduce
financial reporting tools and set up league tables to measure the performance of
different departments or geographies in order to replicate best practice el
sewhere.

Depending on the process involved, however, others may choose to automate
formerly manual processes by switching on a previously unused but paid-for
module in their existing systems or purchase an add-on application instead. For
instance, introducing self-service facilities such as online payslips offers the
possibility of saving money on paper costs, while web-based procurement or
requisitioning applications may speed the activity up and reduce the amount of
manual errors that occur.

Yet other companies, however, find that the interim benefits gained from
simply reworking existing procedures means that strategic system investments can
be made at a later date, possibly financed by any savings achieved.

Another productive exercise, meanwhile, is to both consolidate and align
financial data to ensure that it is both clean and accurate. Such an activity
might involve introducing a single set of accounts or purchasing categories
across the entire group, but is particularly important for budgeting, planning
and forecasting purposes.

‘Data cleansing exercises can be big, but it’s also possible to undertake
tactical projects so that they can be signed off at a lower level and you don’t
have to go through a heavy procurement process,’ says Parton.

But such initiatives are critical, he believes, as they are about getting the
basics right and ensuring that core systems provide the right data at the right
time.

‘Cleansing data, simplifying systems, getting processes correct and educating
and training people are key activities to ensure that businesses are ready for
when things get busy again,’ he concludes.

Further Tactical Investments – Business Intelligence Tools

A key area in which enterprises can generate value if willing to make
incremental tactical investments is what Keith Stone,
Deloitte’s senior partner
for finance transformation in Europe, the Middle East and Africa, calls the
‘reporting and consolidation’ layer.

This layer – which is also known as business intelligence – incorporates
reporting, planning, budgeting and forecasting tools as well as management
information systems. It sits above the source or core financial and accountancy
systems, the database tier and the general ledger and essentially consolidates
the information that they provide for analysis purposes As a result, says Stone:
‘It’s an area in which you can do a lot with a little money.’

Although many organisations have implemented business intelligence tools in
more customer-facing areas of the business, for example, some have yet to
introduce them to present, analyse and report on their financial data.
Therefore, it may be possible to benefit from simply introducing standard
out-of-the-box offerings to use against source systems in order to more
effectively understand the performance of the business.

‘You don’t need a data warehouse unless you’ve got other systems that you
need to report on too, as there’s a wealth of data in most systems that often
simply isn’t being tapped,’ points out Andrew Parton.

A common problem at the opposite side of the spectrum, however, is the fact
that some companies end up generating vast numbers of reports, many of which are
simply never looked at. This leads to staff time being wasted on producing them,
particularly if the data is held in a spreadsheet format rather than in a
centralised system, which means that the process can become very manual.

As a result, reducing the number of redundant reports created, improving the
set up of existing tools and better educating staff on how to use them can prove
a relatively straightforward way to save both time and money.

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